1 EXHIBIT INDEX ON PAGE 16 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: MARCH 31, 1997 ------------------------------------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- ----------------------- Commission File Number: 1-11954 VORNADO REALTY TRUST - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MARYLAND 22-1657560 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification Number) PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (201)587-1000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of May 2, 1997 there were 26,547,680 common shares outstanding. Page 1 of 36
2 VORNADO REALTY TRUST INDEX <TABLE> <CAPTION> Page Number ----------- <S> <C> <C> PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996.................................................... 3 Consolidated Statements of Income for the Three Months Ended March 31, 1997 and March 31, 1996.................................. 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and March 31, 1996.................................. 5 Notes to Consolidated Financial Statements............................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 10 PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K......................................... 14 Signatures ......................................................................... 15 Exhibit Index ......................................................................... 16 Exhibit 3(b) ......................................................................... 17 Exhibit 11 ......................................................................... 35 Exhibit 27 ......................................................................... 36 </TABLE> Page 2 of 36
3 PART I. FINANCIAL INFORMATION VORNADO REALTY TRUST CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS) <TABLE> <CAPTION> MARCH 31, DECEMBER 31, 1997 1996 --------- --------- <S> <C> <C> ASSETS: Real estate, at cost: Land $ 61,278 $ 61,278 Buildings and improvements 327,677 327,485 Leasehold improvements and equipment 8,708 8,535 --------- --------- Total 397,663 397,298 Less accumulated depreciation and amortization (154,016) (151,049) --------- --------- Real estate, net 243,647 246,249 Cash and cash equivalents, including U.S. government obligations under repurchase agreements of $15,812 and $17,036 92,427 89,696 Marketable securities 28,389 27,549 Investment in and advances to Alexander's, Inc. 109,884 107,628 Investment in and advances to Vornado Management Corp. 5,215 5,193 Due from officers 8,623 8,634 Accounts receivable, net of allowance for doubtful accounts of $641 and $575 9,861 9,786 Officer's deferred compensation expense 16,668 22,917 Mortgage note receivable 16,918 17,000 Receivable arising from the straight-lining of rents 17,721 17,052 Other assets 12,132 13,500 --------- --------- TOTAL ASSETS $ 561,485 $ 565,204 ========= ========= </TABLE> <TABLE> <CAPTION> MARCH 31, DECEMBER 31, 1997 1996 --------- --------- <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY: Notes and mortgages payable $ 232,197 $ 232,387 Due for U.S. treasury obligations 9,778 9,636 Accounts payable and accrued expenses 9,942 9,905 Deferred leasing fee income 11,575 8,373 Officer's deferred compensation payable 25,000 25,000 Other liabilities 3,731 3,646 --------- --------- Total liabilities 292,223 288,947 --------- --------- Commitments and contingencies Shareholders' equity: Preferred shares of beneficial interest: no par value per share; authorized, 1,000,000 shares; issued, none Common shares of beneficial interest: $.04 par value per share; authorized, 50,000,000 shares; issued, 26,547,680 shares in each period 1,044 1,044 Additional capital 358,874 358,874 Accumulated deficit (84,575) (77,574) --------- --------- 275,343 282,344 Unrealized loss on securities available for sale (1,023) (998) Due from officers for purchase of common shares of beneficial interest (5,058) (5,089) --------- --------- Total shareholders' equity 269,262 276,257 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 561,485 $ 565,204 ========= ========= </TABLE> See notes to consolidated financial statements.
4 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands except share amounts) <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED -------------------------------- MARCH 31, MARCH 31, 1997 1996 ------------ ------------ <S> <C> <C> Revenues: Property rentals $ 22,467 $ 21,337 Expense reimbursements 6,210 6,881 Other income (including fee income from related parties of $314 and $392) 620 392 ------------ ------------ Total revenues 29,297 28,610 ------------ ------------ Expenses: Operating 8,507 8,914 Depreciation and amortization 2,967 2,835 General and administrative 1,845 1,189 Amortization of officer's deferred compensation expense 6,249 -- ------------ ------------ Total expenses 19,568 12,938 ------------ ------------ Operating income 9,729 15,672 Income/(loss) applicable to Alexander's: Equity in loss (61) (136) Depreciation (150) (157) Interest income on loan 1,616 1,802 Income from investment in and advances to Vornado Management Corp. 217 1,141 Interest income on mortgage note receivable 612 594 Interest and dividend income 1,518 871 Interest and debt expense (4,078) (4,223) Net gain on marketable securities 287 358 ------------ ------------ NET INCOME $ 9,690 $ 15,922 ============ ============ Net Income Per Share $ .36 $ .65 ============ ============ Weighted average number of common shares and common share equivalents outstanding during period 26,549,698 24,464,478 Dividends per share $ .64 $ .61 </TABLE> See notes to consolidated financial statements. Page 4 of 36
5 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED -------------------------- MARCH 31, MARCH 31, 1997 1996 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,690 $ 15,922 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization (including debt issuance costs) 3,228 3,090 Amortization of officer's deferred compensation expense 6,249 -- Straight-lining of rental income (669) (642) Equity in loss of Alexander's, including depreciation of $150 and $157 211 293 Net gain on marketable securities (287) (358) Changes in assets and liabilities: Trading securities (578) 831 Accounts receivable (75) (1,761) Accounts payable and accrued expenses 37 381 Other 1,947 446 -------- -------- Net cash provided by operating activities 19,753 18,202 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in mortgage note receivable 82 (17,000) Additions to real estate (365) (1,501) Proceeds from sale or maturity of securities available for sale -- 41,192 -------- -------- Net cash (used in) provided by investing activities (283) 22,691 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of borrowings on U.S. treasury obligations -- (40,036) Proceeds from borrowings on U.S. treasury obligations 142 10,000 Proceeds from revolving credit facility -- 10,000 Repayments on mortgages (190) (175) Dividends paid (16,691) (14,813) Exercise of stock options -- 676 -------- -------- Net cash used in financing activities (16,739) (34,348) -------- -------- Net increase in cash and cash equivalents 2,731 6,545 Cash and cash equivalents at beginning of period 89,696 19,127 -------- -------- Cash and cash equivalents at end of period $ 92,427 $ 25,672 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments for interest $ 3,817 $ 3,968 ======== ======== NON-CASH TRANSACTIONS: Unrealized (loss) gain on securities available for sale $ (25) $ 24 ======== ======== </TABLE> See notes to consolidated financial statements. Page 5 of 36
6 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of March 31, 1997, the consolidated statements of income for the three months ended March 31, 1997 and March 31, 1996 and the consolidated statements of changes in cash flows for the three months ended March 31, 1997 and March 31, 1996 are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1996 Annual Report to Shareholders. The results of operations for the period ended March 31, 1997 are not necessarily indicative of the operating results for the full year. 2. INVESTMENTS IN AND ADVANCES TO ALEXANDER'S (A RELATED PARTY): Below are summarized Statements of Operations of Alexander's: <TABLE> <CAPTION> Three Months Three Months Ended Ended March 31, 1997 March 31, 1996 -------------- -------------- <S> <C> <C> Statement of Operations: Revenues $ 5,998,000 $ 4,684,000 Expenses (3,164,000) (2,451,000) ----------- ----------- Operating income 2,834,000 2,233,000 Interest and debt expense (3,294,000) (3,317,000) Other income and interest income, net 252,000 622,000 ----------- ----------- Net loss from continuing operations $ (208,000) $ (462,000) =========== =========== Vornado's 29.3% equity in loss $ (61,000) $ (136,000) =========== =========== </TABLE> The Company recognized leasing fee income under a leasing agreement (the "Leasing Agreement") with Alexander's of $171,000 and $110,000 for the three months ended March 31, 1997 and 1996. Subject to the payment of rents by Alexander's tenants, the Company is due $8,318,000 at March 31, 1997 under such agreement. In addition to the leasing fees received by the Company, Vornado Management Corp. receives management fees from Alexander's (see Note 3). Page 6 of 36
7 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. VORNADO MANAGEMENT CORP. The Company previously assigned its management and development agreement (the "Management Agreement") with Alexander's to Vornado Management Corp. ("VMC"), an affiliate. Below are summarized Statements of Operations of VMC: <TABLE> <CAPTION> Three Months Three Months Ended Ended March 31, 1997 March 31, 1996 -------------- -------------- <S> <C> <C> Revenues: Management fees from Alexander's $ 937,000 $ 2,430,000 Expenses: General and administrative 703,000 563,000 Interest, net 75,000 69,000 --------- ----------- Income before income taxes 159,000 1,798,000 Income taxes 65,000 735,000 --------- ----------- Net income 94,000 1,063,000 Preferred dividends to Vornado (89,000) (1,010,000) --------- ----------- Net income available to common shareholders $ 5,000 $ 53,000 ========= =========== </TABLE> The fee income in the three months ended March 31, 1996, includes $1,343,000 of fees related to the substantial completion of the redevelopment of Alexander's Rego Park I property. In addition to the preferred dividends the Company received, it also earned interest income on its loan to VMC of $128,000 and $131,000 for the three months ended March 31, 1997 and 1996. 4. OTHER RELATED PARTY TRANSACTIONS The Company currently manages and leases the real estate assets of Interstate Properties pursuant to a management agreement. Management fees earned by the Company pursuant to the management agreement were $193,000 and $331,000 for the three months ended March 31, 1997 and 1996. Page 7 of 36
8 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. SUBSEQUENT EVENTS Mendik Transaction On April 15, 1997, the Company consummated the acquisition, through an operating partnership, of interests in all or a portion of seven Manhattan office buildings and certain management and leasing assets held by the Mendik Group (Bernard H. Mendik, David R. Greenbaum and certain entities controlled by them) and certain of its affiliates. Simultaneously with the closing of this transaction, and in connection therewith, the Company converted to an Umbrella Partnership REIT (UPREIT) by transferring (by contribution, merger or otherwise) all or substantially all of the interests in its properties and other assets to The Mendik Company, L.P., a Delaware limited partnership which has been renamed Vornado Realty L.P. (the "Operating Partnership"), of which the Company is the sole general partner. As a result of such conversion, the Company's activities will be conducted through the Operating Partnership. The consideration for the transaction was approximately $656,000,000, including $264,000,000 in cash, $177,000,000 in the limited partnership units of the Operating Partnership and $215,000,000 in indebtedness. The Company financed the cash portion of this transaction with the proceeds of a public offering completed on April 9, 1997, of 5,750,000 Convertible Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share. The preferred shares bear a coupon of 6-1/2% and are convertible into common shares at $72-3/4 per share. The offering, net of expenses, generated approximately $276,000,000. The unaudited proforma revenues for the Company were $53,200,000 for the three months ended March 31, 1997, assuming the Mendik transaction had occurred on January 1, 1997. In connection with the transaction, Bernard Mendik, the Chairman of the Board of Directors of Mendik Realty, has become Co-Chairman of the Board of Trustees and Chief Executive Officer of the Mendik Division of the Company. David Greenbaum has become President of the Mendik Division of the Company. Steven Roth continues as the Company's Chairman and Chief Executive Officer. Term Loan On April 15, 1997, the Company entered into a Credit Agreement with Union Bank of Switzerland pursuant to which the Company borrowed $400,000,000. The loan bears interest at the rate of LIBOR plus .625% (6.31% at April 15, 1997) and matures, assuming exercise of extension options, on April 14, 1998. Page 8 of 36
9 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. SUBSEQUENT EVENTS - CONTINUED Puerto Rico Transactions On April 18, 1997, the Company announced that it acquired The Montehiedra Town Center located in San Juan, Puerto Rico, from Kmart Corporation ("Kmart") for approximately $74,000,000, of which $63,000,000 is newly-issued ten year indebtedness. The Montehiedra shopping center, which opened in 1994, contains 525,000 square feet, including a 135,000 square foot Kmart store. In addition, the Company agreed to acquire Kmart's 50% interest in the Caguas Centrum Shopping Center, which is currently under construction, located in Caguas, Puerto Rico. This acquisition is expected to close in 1998. Purchase of a Mortgage On May 7, 1997, the Company acquired a mortgage loan from a bank secured by a mortgage on the office building located at 90 Park Avenue, New York, New York. The purchase price of the mortgage loan was approximately $185,000,000. The mortgage loan, which is in default, has a face value of $193,000,000. Page 9 of 36
10 VORNADO REALTY TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $29,297,000 in the quarter ended March 31, 1997, compared to $28,610,000 in the prior year's quarter, an increase of $687,000 or 2.4%. Property rentals were $22,467,000 in the quarter ended March 31, 1997, compared to $21,337,000 in the prior year's quarter, an increase of $1,130,000 or 5.3%. Of this increase (i) $569,000 resulted from property rentals received from new tenants in excess of property rentals lost from vacating tenants, (ii) $285,000 resulted from the Company's purchase of an office building in June 1996 and (iii) $276,000 resulted from step-ups in leases which are not subject to the straight-line method of revenue recognition. Tenant expense reimbursements were $6,210,000 in the quarter ended March 31, 1997, compared to $6,881,000 in the prior year's quarter, a decrease of $671,000. This decrease primarily reflects a corresponding decrease in operating expenses passed through to tenants. Operating expenses were $8,507,000 in the quarter ended March 31, 1997, as compared to $8,914,000 in the prior year's quarter, a decrease of $407,000. This decrease resulted primarily from lower snow removal costs partially offset by higher real estate taxes. Depreciation and amortization expense for the three months ended March 31, 1997, did not change significantly from such expense for the prior year's period. General and administrative expenses were $1,845,000 in the quarter ended March 31, 1997, compared to $1,189,000 in the prior year's quarter, an increase of $656,000. This increase resulted primarily from cash compensation attributable to the employment of the Company's President. The Company recognized an expense of $6,249,000 in the quarter ended March 31, 1997 representing one-quarter of the amortization of the $25,000,000 deferred payment due to the Company's President. The balance of the deferred payment will be amortized in 1997. Income applicable to Alexander's (loan interest income, equity in loss and depreciation) was $1,405,000 in the three months ended March 31, 1997, compared to $1,509,000 in the prior year's quarter, a decrease of $104,000. Income from investment in and advances to VMC was $217,000 for the three months ended March 31, 1997 as compared to $1,141,000 in the prior year's quarter. Income from investment in and advances to VMC for the three months ended March 31, 1996 reflected additional fee income of $794,000 earned by VMC relating to the substantial completion of the redevelopment of Alexander's Rego Park I property. Investment income (interest income on mortgage note receivable, interest and dividend income and net gains on marketable securities) was $2,417,000 for the quarter ended March 31, 1997, compared to $1,823,000 in the prior year's quarter, an increase of $594,000 or 33%. This increase resulted from income earned on the proceeds from the December 1996 public stock offering. Interest and debt expense for the three months ended March 31, 1997, did not change significantly from such expense for the prior year's period. Page 10 of 36
11 VORNADO REALTY TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Three Months Ended March 31, 1997 Cash flows provided by operating activities of $19,753,000 was comprised of (i) net income of $9,690,000 (ii) adjustments for non-cash items of $8,732,000 and (iii) the net change in operating assets and liabilities of $1,331,000. The adjustments for non-cash items are primarily comprised of (i) amortization of deferred officer's compensation expense of $6,249,000, (ii) depreciation and amortization of $3,228,000 and (iii) equity in loss of Alexander's of $211,000 offset by (iv) the effect of straight-lining of rental income of $669,000. Net cash used in investing activities of $283,000 was primarily comprised of capital expenditures. Net cash used in financing activities of $16,739,000 was primarily comprised of dividends paid. Three Months Ended March 31, 1996 Cash flows provided by operating activities of $18,202,000 was comprised of (i) net income of $15,922,000 and (ii) adjustments for non-cash items of $2,383,000, less (iii) the net change in operating assets and liabilities of $103,000. The adjustments for non-cash items are primarily comprised of depreciation and amortization of $3,090,000, plus equity in loss of Alexander's of $293,000, offset by the effect of straight-lining of rental income of $642,000. Further, during this period in connection with the rejection of a lease by an Alexander's tenant "Leasing fees and other receivables" decreased by $1,717,000 and "Deferred leasing fee income" correspondingly decreased. "Leasing fees and other receivables" of $490,000 were collected during this period. These amounts have been included in "Changes in assets and liabilities: other" in the Consolidated Statements of Cash Flows and are part of the net change in operating assets and liabilities shown in item (iii) above. Net cash provided by investing activities of $22,691,000 was comprised of (i) proceeds from sale or maturity of securities available for sale of $41,192,000, offset by (ii) the Company's investment in a mortgage note receivable of $17,000,000 and (iii) capital expenditures of $1,501,000. Net cash used in financing activities of $34,348,000 was primarily comprised of (i) the net repayment of borrowings on U.S. Treasury obligations of $30,036,000 and (ii) dividends paid of $14,813,000, offset by (iii) the proceeds from borrowings of $10,000,000. Page 11 of 36
12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Funds from Operations for the Three Months Ended March 31, 1997 and 1996 Management considers funds from operations an appropriate supplemental measure of the Company's operating performance. Funds from operations were $12,230,000 in the quarter ended March 31, 1997, compared to $18,416,000 in the prior year's quarter, a decrease of $6,186,000 or 34%. Funds from operations for the quarter ended March 31, 1997 reflect an expense of $6,249,000, representing one-quarter of the amortization of the deferred payment due to the Company's President and $594,000 of related cash compensation. The following table reconciles funds from operations and net income: <TABLE> <CAPTION> Three Months Ended -------------------------------- March 31, March 31, 1997 1996 ------------ ------------ <S> <C> <C> Net income $ 9,690,000 $ 15,922,000 Depreciation and amortization of real property 2,681,000 2,612,000 Straight-lining of property rentals for rent escalations (669,000) (642,000) Leasing fees received in excess of income recognized 454,000 514,000 Proportionate share of adjustments to Alexander's income/(loss) to arrive at funds from operations 74,000 10,000 ------------ ------------ Funds from operations * $ 12,230,000 $ 18,416,000 ============ ============ </TABLE> * The Company's definition of funds from operations does not conform to the NAREIT definition because the Company deducts the effect of straight-lining of property rentals for rent escalations. Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. Funds from operations should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. Below are the cash flows provided by (used in) operating, investing and financing activities: <TABLE> <CAPTION> Three Months Ended -------------------------------- March 31, March 31, 1997 1996 ------------ ------------- <S> <C> <C> Operating activities $ 19,753,000 $ 18,202,000 ============ ============ Investing activities $ (283,000) $ 22,691,000 ============ ============ Financing activities $(16,739,000) $(34,348,000) ============ ============ </TABLE> Page 12 of 36
13 VORNADO REALTY TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In December 1996, Michael D. Fascitelli became the President of the Company and was elected to the Company's Board. Mr. Fascitelli signed a five year employment contract under which, in addition to his annual salary, he received a deferred payment consisting of $5,000,000 in cash and a $20,000,000 convertible obligation payable at the Company's option in 459,770 of its Common Shares or the cash equivalent of their appreciated value. Accordingly, cash of $5,000,000 and 459,770 Common Shares are being held in an irrevocable trust. The deferred payment obligation to Mr. Fascitelli vests as of December 2, 1997. Further, Mr. Fascitelli was granted options for 1,750,000 Common Shares of the Company. On April 15, 1997, the Company consummated the acquisition, through an operating partnership, of interests in all or a portion of seven Manhattan office buildings and certain management and leasing assets held by the Mendik Group and certain of its affiliates. Simultaneously with the closing of this transaction, and in connection therewith, the Company converted to an Umbrella Partnership REIT (UPREIT) by transferring (by contribution, merger or otherwise) all or substantially all of the interests in its properties and other assets to The Mendik Company, L.P., a Delaware limited partnership which has been renamed Vornado Realty L.P. (the "Operating Partnership"), of which the Company is the sole general partner. As a result of such conversion, the Company's activities will be conducted through the Operating Partnership. The consideration for the Mendik transaction was approximately $656,000,000, including $264,000,000 in cash, $177,000,000 in the limited partnership units of the Operating Partnership and $215,000,000 in indebtedness. The Company financed the cash portion of this transaction with the proceeds of a public offering completed on April 9, 1997, of 5,750,000 Convertible Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share. The preferred shares bear a coupon of 6-1/2% and are convertible into common shares at $72- 3/4 per share. The offering, net of expenses, generated approximately $276,000,000. Also, on April 15, 1997, the Company entered into a Credit Agreement with Union Bank of Switzerland pursuant to which the Company borrowed $400,000,000. The loan bears interest at the rate of LIBOR plus .625% and matures, assuming exercise of extension options, on April 14, 1998. On April 18, 1997, the Company announced that it acquired The Montehiedra Town Center located in San Juan, Puerto Rico, from Kmart Corporation ("Kmart") for approximately $74,000,000, of which $63,000,000 is newly-issued ten year indebtedness. The Montehiedra shopping center, which opened in 1994, contains 525,000 square feet, including a 135,000 square foot Kmart store. In addition, the Company agreed to acquire Kmart's 50% interest in the Caguas Centrum Shopping Center, which is currently under construction, located in Caguas, Puerto Rico. This acquisition is expected to close in 1998. Further, on May 7, 1997, the Company acquired a mortgage loan from a bank secured by a mortgage on the office building located at 90 Park Avenue, New York, New York. The purchase price of the mortgage loan was approximately $185,000,000. The mortgage loan, which is in default, has a face value of $193,000,000. The Company anticipates that cash from continuing operations, net liquid assets, borrowings under its revolving credit facility and/or proceeds from the issuance of securities under the Company's shelf registration statement will be adequate to fund its business operations, capital expenditures, continuing debt obligations and the payment of dividends. RECENTLY ISSUED ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board adopted Statement No. 128, "Earnings Per Share". The statement is effective for fiscal years ending after December 15, 1997. The Company believes that this pronouncement will not have a material effect on its net income per share. Page 13 of 36
14 VORNADO REALTY TRUST PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: The following exhibits are filed with this Quarterly Report on Form 10-Q. 3(b) By-laws of Vornado as amended. 11 Statement Re Computation of Per Share Earnings. 27 Financial Data Schedule. (b) Reports on Form 8-K During the quarter ended March 31, 1997, Vornado Realty Trust filed the report on Form 8-K described below: <TABLE> <CAPTION> Date of Report (Date of Earliest Event Reported) Item Reported Financial Statements Filed Date Filed - --------------- ------------- -------------------------- ---------- <S> <C> <C> <C> March 12, 1997 Other events - A Financial statements for the years ended March 26, 1997 Consolidation December 31, 1996, 1995 and 1994 for Two Agreement with Penn Plaza Associates L.P. (a Limited the Mendik Partnership) (including independent Company auditors' report) B Combined financial statements for the years ended December 31, 1996, 1995 and 1994 for M Eleven Associates, M 393 Associates and Eleven Penn Plaza Company (General Partnerships) (including independent auditors' report) C Financial statements for the years ended December 31, 1996, 1995 and 1994 for 1740 Broadway Associates, L.P. (a Limited Partnership) (including independent auditors' report) D Financial statements for the years ended December 31, 1996, 1995 and 1994 for 866 U.N. Plaza Associates LLC (a Limited Liability Company) (including independent auditors' report) E Financial statements for the years ended December 31, 1996, 1995 and 1994 for Two Park Company (a New York general partnership) (including independent auditors' report) F Financial statements for the years ended December 31, 1996, 1995 and 1994 for B&B Park Avenue L.P. (a Limited Partnership) (including independent auditors' report) G Condensed consolidated proforma financial statements for the Company for the year ended December 31, 1996 </TABLE> Page 14 of 36
15 VORNADO REALTY TRUST SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VORNADO REALTY TRUST ------------------------------------ (Registrant) Date: May 8, 1997 /s/ Joseph Macnow ------------------------------------ JOSEPH MACNOW Vice President - Chief Financial Officer and Chief Accounting Officer Page 15 of 36
16 VORNADO REALTY TRUST EXHIBIT INDEX PAGE NUMBER IN SEQUENTIAL EXHIBIT NO. NUMBERING - ----------- -------------- 3(b) By-laws of Vornado as amended on April 28, 1997. 17 11 Statement Re Computation of Per Share Earnings. 35 27 Financial Data Schedule. 36 Page 16 of 36